Question 1

If producers must receive a higher price to be induced to produce any quantity,we can conclude that
A)supply decreased.
B)demand decreased.
C)both supply and demand increased.
D)demand increased.

Accepted Answer

When producers require a higher price to produce any quantity, it indicates that the supply has decreased. This is because the production cost has increased, and therefore, producers will offer less quantity at the prevailing market price.

Question 2

Suppose the price of lumber decreases.In the market for new homes,we would expect which of the following to occur?
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

When the price of lumber decreases, the cost of building a new home decreases. This leads to an increase in supply of new homes, which shifts the supply curve to the right. As supply increases, the market clearing price falls and the equilibrium quantity rises. This is represented by choice A.

Question 3

When supply and demand for a product decrease simultaneously,we
A)can predict that both equilibrium price and quantity will increase.
B)can predict that both equilibrium price and quantity will decrease.
C)cannot predict equilibrium price,but know that equilibrium quantity will decrease.
D)cannot predict the change in either the equilibrium quantity or equilibrium price.

Accepted Answer

When both supply and demand decrease simultaneously, it is difficult to predict the equilibrium price, but we can expect equilibrium quantity to decrease. This is because with less supply and less demand, there is less of the product available and less of a market for it, leading to a decrease in quantity. The change in equilibrium price is uncertain because it depends on the size of the shifts in supply and demand, which may offset each other or have unequal effects on price. Therefore, we cannot make a prediction about the equilibrium price in this scenario.

Question 4

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price,assuming no market interference.

Accepted Answer

The answer of Describe the market process that should occur...

Question 5

If both buyers and sellers expect the price of a commodity to fall in the future,it is likely that the market clearing price ________ and the equilibrium quantity ________.
A)will fall,cannot be predicted
B)will rise,cannot be predicted
C)cannot be predicted,will fall
D)cannot be predicted,will rise

Accepted Answer

If both buyers and sellers expect the price of a commodity to fall in the future, they will decrease their demand and suppliers will decrease their supply resulting in a decrease in the market clearing price. However, the equilibrium quantity cannot be predicted as it depends on the magnitude of the decrease in both demand and supply.

Question 6

Economists assume that when there is a change in supply and/or demand,the market clearing price returns to the equilibrium
A)quickly.
B)slowly.
C)after a protracted negotiation process.
D)after an adjustment period.

Accepted Answer

When there is a change in supply and/or demand, it takes an adjustment period for the market to reach equilibrium again. This adjustment period can vary in length depending on the magnitude of the change and the characteristics of the market. Therefore, option D is the best choice.

Question 7

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that
A)both the equilibrium price and the equilibrium quantity will increase.
B)the equilibrium price will increase,and the equilibrium quantity will increase.
C)the equilibrium quantity will increase.
D)the equilibrium price will increase.

Accepted Answer

Since there is an increase in both demand and supply, the equilibrium price will be affected in an uncertain way as it can either increase, decrease, or remain constant depending on the extent to which demand and supply shift. However, we can be certain that the equilibrium quantity will increase as both demand and supply are increasing.

Question 8

When supply increases and at the same time demand decreases,we
A)can predict that both equilibrium price and quantity will increase.
B)can predict that both equilibrium price and quantity will decrease.
C)cannot predict equilibrium quantity,but know that equilibrium price will decrease.
D)cannot predict the change in either the equilibrium quantity or equilibrium price.

Accepted Answer

When supply increases, it puts downward pressure on price because more goods are available. When demand decreases, it further reduces the price because there's less desire for the goods. However, the effect on quantity is uncertain without knowing the magnitude of the shifts in supply and demand.

Question 9

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day.Several months later,the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day.What happened in the market?

Accepted Answer

The answer of Suppose that initially a market is in...

Question 10

Using a graph,show a market equilibrium.Suppose the costs of inputs increase.How is this shown on the graph? Explain what is happening in the market.

Accepted Answer

The answer of Using a graph,show a market equilibrium.Suppose the...

Question 11

If the demand for a product falls and the supply stays the same,
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

When demand for a product decreases while supply remains constant, the market clearing price will fall because sellers are willing to accept lower prices to sell their products. The equilibrium quantity will also fall because there is less demand for the product at any given price, leading to fewer transactions.

Question 12

If the demand for a product remains the same and the supply falls,
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

When supply falls and demand remains same, there is a shortage in the market. This leads to an increase in the market clearing price as consumers compete to buy the limited product. However, the equilibrium quantity will decrease as suppliers are unable to provide the same quantity of the product due to the decrease in supply.

Question 13

When supply and demand for a product increase simultaneously,we
A)can predict that both the market clearing price and the equilibrium quantity will increase.
B)can predict that both the market clearing price and the equilibrium quantity will decrease.
C)cannot predict the market clearing price,but know that the equilibrium quantity will increase.
D)cannot predict the change in either the equilibrium quantity or the market clearing price.

Accepted Answer

When both supply and demand increase, the equilibrium quantity will definitely increase because more is being supplied and more is being demanded. However, the effect on the market clearing price is uncertain without knowing the relative magnitudes of the shifts in supply and demand.

Question 14

If both buyers and sellers expect the price of a commodity to rise in the future,it is likely that the market clearing price ________ and the equilibrium quantity ________.
A)will fall,cannot be predicted
B)will rise,cannot be predicted
C)cannot be predicted,will fall
D)cannot be predicted,will rise

Accepted Answer

Expectations of a future price increase will lead to increased demand for the commodity, which will push the market clearing price up. The equilibrium quantity cannot be predicted as it depends on the magnitude of the increase in demand and the elasticity of supply.

Question 15

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,the market clearing price ________ and the equilibrium quantity ________.
A)definitely falls,is indeterminate
B)is indeterminate,definitely falls
C)definitely falls,definitely rises
D)definitely rises,is indeterminate

Accepted Answer

The increase in the price of crude oil will shift the supply curve of gasoline to the left, resulting in a higher equilibrium price and lower quantity. However, the increase in the number of hybrid cars will shift the demand curve for gasoline to the left as well, resulting in a lower equilibrium price and quantity. Without more information on the magnitude of these shifts, it is impossible to determine the direction of the market clearing price and quantity, hence the answer is indeterminate.

Question 16

In the market for domestic avocados,what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?
A)The market clearing price would rise,and the equilibrium quantity would rise.
B)The market clearing price would fall,and the equilibrium quantity would rise.
C)The market clearing price would rise,and the equilibrium quantity would fall.
D)The market clearing price would fall,and the equilibrium quantity would fall.

Accepted Answer

A drought in avocado growing areas would decrease the supply of avocados, which would shift the supply curve to the left. This would result in a higher market clearing price and a lower equilibrium quantity, as consumers would demand less of avocados at the higher price.

Question 17

If the demand for a product rises and the supply stays the same
A)the market clearing price will fall and the equilibrium quantity will rise.
B)the market clearing price will rise and the equilibrium quantity will fall.
C)both the market clearing price and the equilibrium quantity will fall.
D)both the market clearing price and the equilibrium quantity will rise.

Accepted Answer

If the demand for a product rises and the supply stays the same, there will be a shortage of the product which will cause the market clearing price to rise. As the price rises, it will incentivize suppliers to produce more of the product, causing the equilibrium quantity to rise as well. Therefore, both the market clearing price and the equilibrium quantity will rise.

Question 18

If one day it was discovered that lime juice caused cancer,which of the following would likely result?
A)The supply curve for lime juice would shift to the right.
B)The supply curve for lime juice would shift to the left.
C)The demand curve for lime juice would shift to the right.
D)The demand curve for lime juice would shift to the left.

Accepted Answer

If it was discovered that lime juice caused cancer, there would likely be a decrease in demand for lime juice as consumers would be hesitant to purchase it due to health concerns. This would lead to a leftward shift in the demand curve for lime juice.

Question 19

Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a monthly quantity of 20 million pounds.News of a freeze in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced.What,if anything,will happen in the coffee market now? Explain.

Accepted Answer

The answer of Suppose that the market for coffee is...

Question 20

When the supply and/or demand curve shift,the new market clearing price is
A)reached instantaneously.
B)reached only after the government intervenes in the market.
C)reached after some period of adjustment.
D)never reached.

Accepted Answer

When the supply and/or demand curve shift, it takes some time for the market to adjust and reach a new equilibrium price. This adjustment period can vary depending on the nature of the shift and the type of market. However, in a competitive market, the market will eventually reach a new equilibrium price where the quantity supplied equals the quantity demanded.

Quiz 3: Extensions of Demand and Supply Analysis

If producers must receive a higher price to be induced to produce any quantity,we can conclude that

Suppose the price of lumber decreases.In the market for new homes,we would expect which of the following to occur?

When supply and demand for a product decrease simultaneously,we

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price,assuming no market interference.

If both buyers and sellers expect the price of a commodity to fall in the future,it is likely that the market clearing price and the equilibrium quantity .

Economists assume that when there is a change in supply and/or demand,the market clearing price returns to the equilibrium

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that

When supply increases and at the same time demand decreases,we

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day.Several months later,the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day.What happened in the market?

Using a graph,show a market equilibrium.Suppose the costs of inputs increase.How is this shown on the graph? Explain what is happening in the market.

If the demand for a product falls and the supply stays the same,

If the demand for a product remains the same and the supply falls,

When supply and demand for a product increase simultaneously,we

If both buyers and sellers expect the price of a commodity to rise in the future,it is likely that the market clearing price and the equilibrium quantity .

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,the market clearing price and the equilibrium quantity .

In the market for domestic avocados,what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

If the demand for a product rises and the supply stays the same

If one day it was discovered that lime juice caused cancer,which of the following would likely result?

When the supply and/or demand curve shift,the new market clearing price is